I'm sure most readers of this blog have seen the 1993 comedy classic ‘Groundhog Day' starring Bill Murray and Andie MacDowell. Just in case you haven't and you were planning on curling up next to your favourite lady or lady-boy on the couch and watching it this evening, then here is a spoiler alert!
Bill Murray finds himself caught in an ever repetitive day where the exact same things happen at the exact same time day after day after day! This frustrates Bill's character initially, but about half-way through the movie he realizes that because he knows what will be coming next, he can take advantage of it, with some amusing results. Eventually though he realizes that to stop the repetition he has to do something completely different and get Andie MacDowell to fall in love with him, which he eventually achieves.
Of course this is just an interesting and original little rom-com, but there are some very valuable lessons that can be learnt from it. At the end of the day, history often repeats itself. As President Harry Truman famously once said ‘The only thing new in this world is the history you do not know.' Fortunately the repetition is not as precise as that of Groundhog Day, however learning from the past is very possible. And like Bill Murray's character, some people can use this to their advantage.
So how does this relate to real estate in Bangkok? Well more about that later, but first it's worth appreciating firstly that most of the time, most of the people do not learn from the past. In fact even very smart people can find it incredibly difficult to learn from even the very recent past.
An example of this can be the Federal Reserve in America. Since the stock market crash of 2008 and the subsequent GFC the Federal Reserve or Fed as it is also known has pumped $4.5 trillion dollars into the economy by buying assets from banks such as mortgage-backed securities and treasury notes. It has done this in a series of 3 stages QE1 Nov 2008~Aug 2010, QE2 Nov 2010~Jun 2011 and QE3 Sept 2012~Oct 2014.
This result of all this money pumping to stimulate the US economy, has been to increase the amount of US dollars in the world by a massive 400%. It has also given the US Government a massively increased national debt. Alan Greenspan the former Chairman of the Fed said in in July 2012 it had ‘very little effect on the economy'. What it has done however is massively inflated the stock market in the US and stimulated those in Western Europe indirectly.
Here is a perfect example of people not learning from the past and using it to their advantage. The first round of QE did not work in 2008~2010, so what was the answer? You guessed it, a second round of QE, which again failed to deliver, so what was the answer? Yes I'm sure you got it...round 3 of QE! Eventually of course this will be found not to achieve the required results and there will be a fourth round of QE.
As Einstein once said ‘the definition of insanity is doing the same thing over and over and expecting a different result'. In Groundhog Day, even Bill Murray's character, a weather reporter figured this out and changed his tactics to achieve the results he wanted. It seems however others are less shrewd.
The actions of the Fed resonate with those of the General's and Field Marshall's of World War One. And it seems fitting writing this blog on 11-November, Armistice Day in the year when we commemorate the 100 year anniversary of the start of the war to end all wars, to remember how the foolish decisions of a few can lead to the destruction of so many.
Anyone who has also seen another comedy classic ‘Black Adder goes Fourth' will know exactly what I am talking about here, with the military tacticians on both sides of the conflict not only displaying zero imagination, but just like the Fed trying and trying the same tactics again and again and again expecting a different result. When of course all this led to was failure upon failure.
The end of the war did not lead, as we know, to lasting peace and one of the main reasons for that was the debt repayment scheme imposed upon Germany, which led to hyper-inflation due to the over printing of money to finance an ever increasing debt. See anything familiar above?
So now if you've read this far, you're thinking ‘What on earth has his got to do with Real Estate in Bangkok?'. Well expats living in Thailand are lucky enough to in effect come from the future. In many ways, but not all, Bangkok in 2014 is a bit like a Western capitol 100 years ago.
1. Public infrastructure is in its infancy , the 3 lines of the BTS and MRT can be compared to the early stages of the Paris Metro and London Underground
2. The welfare system of Thailand is small and relatively rudimentary. Western Europe had the roots of a welfare system in the early part of the 20th century, but the not the large lumbering nanny states of today.
3. There are alliances and agreements in place in SE Asia, but not yet the multi-state unions like the EU.
If the 20th century belonged to Europe and the USA, then perhaps the 21st century can belong to SE Asia and cities like Bangkok, can perform as well as cities like London, Paris and Frankfurt.
For all the destruction and mistakes of the western powers in the 20th century, they did in fact grown incredibly rapidly and some people made huge gains.
For example if you knew back in 1914 that a property bought in London city center would increase by over 3000% (yes three thousand) by 2014, would you have thought that was a good investment for you and your family? So why can't Bangkok real estate be as lucrative, or even more so, than London or New York?
There are lessons to learnt from the past, but like Bill Murray's character discovered they don't all lead to misery. Mistakes can be avoided and knowledge can be used to your advantage.
Neil McDonough is a Director of EasyHomes Property Services Co., Ltd. which specializes in renting and selling Bangkok residential and commercial property to expats. You can contact him directly with any questions or queries relating to Thai real estate